Horizontal and Vertical Integration Strategy Assignment Help

Horizontal integration and vertical integration are like competitive strategies that companies utilize to be able to consolidate their market position among competitors. Rise on till integration can be considered the acquisition of a very much related business. A company willing to opt for horizontal integration will certainly be taking over another company that is operating at the same level of the same value chain in a certain industry.

What is horizontal integration?

As mentioned earlier horizontal integration is a competitive strategy that provides a company much more strength than its competitors. In and horizontal integration if the company can collaborate and make partnerships with another company at the same level and in a similar value chain of the industry. The examples of horizontal integration are several such as the merger of the truth companies particularly at similar levels in the production supply chain which is also known as horizontal integration. The transaction does allow the two companies or more Tu to be able to expand their market share for other as well as cut cost with achieving synergies. These integrations can certainly include the kinds of companies from different industries but they will be the opposite of the vertical integrations or which include companies that can be at the different production supply stages. One of the famous examples of horizontal integration could be the collaboration and acquisition of Instagram by Facebook. Both Facebook and Instagram were operating in a similar industry which is social media and used to share similar production stages which are photo sharing services and much more. Facebook was willing to strengthen its position in the market which was threatened by many competitors growing stronger at that time. When Facebook realized the need to strengthen its position in the social sharing space it found an opportunity in the acquisition of a bigger company like Instagram to grow its market share easily as well as reduce the competition that was going as a potential threat to the company. Facebook also had wanted to gain access to new audiences. Facebook realized accessing all these only through the acquisition of Instagram and therefore Instagram is now owned by Facebook however it is still operating independently as a social media site or platform.

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Vertical versus horizontal integration

Both horizontal and vertical integration is excellent sources to gaining advantage competitive advantage but there are significant differences between the two stages. Vertical integration occurs only when a business owns or manages the various parts of the industrial process. On the contrary horizontal integration takes place only when the business is willing to grow or grows by purchasing its rivals. A horizontal acquisition can be considered a business strategy in which one company takes over the other which is also operating at the same level of the industry. Vertical integration can involve the acquisition of a business operation within and necessarily at the same production level. Horizontal integrations can help companies expanding in terms of size, diversifying product offerings, expanding into new markets, and reducing competition. Vertical integrations on the other hand can easily help boost profit and enable companies faster and easier access to consumers. Companies willing to strengthen their market positions and enhancing their production capability or distribution stage will certainly go for horizontal integration.

Horizontal integration examples

Apart from Facebook and Instagram collaboration and another significant example of horizontal integration can be found in the partnership of Walt Disney company’s acquisition of Pixar Animation Studios in 2006. Disney itself begins as an animation studio targeting children and families but the entertainment joint was seen facing hurdles and barriers as market saturation with its current operations leaving aside the creative stagnation. Pixel which operated in a similar industry the animation is space as Disney its digitally animated movies were using cutting-edge technology as well as an innovative vision. The deal at the moment is considered widely to have figuratively and literally reanimated Disney helping it expand its market share as well as boosting its profits.

What are the advantages of horizontal integration?

Horizontal integration can prove to be an advantage in many ways. It can help lower down the cost. The outcome of horizontal integration for a larger company will be that it produces more products and services to serve its customers better than before. Horizontal integration can also help in regards to increased differentiation and as the combined company will be able to offer more products and service features and thereby serving their customers even much better than they had been doing earlier. Horizontal integration can also help increase market power which is certain because the magnified skills and ability to serve customers better will only increase the market power. One of the most critical aspects of horizontal integration is it helps the company reduce competition. For example, in the above mentioned it was shown that Facebook acquired Instagram and Disney acquired Pixar which were the horizontal integration cases. It is worth noting a fact that Pixar was proving to be a tough competitor for Disney whereas Instagram was for Facebook. Horizontal integration can also help access new markets.

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Advantages and disadvantages of horizontal integration

While there are many benefits of going for horizontal integration the most obvious advantage could be an increased market share for the organization opting for it. When two companies combine, they do not just combine but also let their products combine and show their Technology as well. In addition, the services which they provide to the market also combine, and when these things multiply the result is increased consumer foothold.

Besides, there are numerous benefits of horizontal integration it has its downsides for the market. This kind of strategy goes under strict resilience and a high level of scrutiny from government agencies. Merging two companies that are operating within a similar supply chain can be reasons for cutting down on competition and therefore reducing the numerous choices that could be available for consumers. If that happens it can lead to mono Poly where one of the companies will be playing the dominant force controlling the prices the availability and the supply of products and services.